SEBI GUIDELINES on the issue of bonus shares
There are no guidelines for issuing bonus shares by the private companies or unlisted public companies has been issued by the SEBI (Disclosure and investor protection) Guidelines, 2000.
However, the listed public companies for issuing bonus shares to the shareholders must comply with the guidelines issued by the SEBI (disclosure and Investor Protection) Guidelines, 2000.
The requirements of the guidelines of SEBI are given below:-
a) Right of FCD/PCD holders: No company shall pending the conversion of FCDs/PCDs issue any shares by way of bonus unless similar benefit is extended to the holders of FCDs/PCDs, through reservation of shares in proportion to such convertible part of FCDs/PCDs. The shares so reserved may be issued at the time of conversion of such debentures on the same terms on which the rights or bonus issues were made.
b) Out of free reserves: the bonus issue shall be made out of free reserves built out of genuine profits or share premium collected in cash only.
c) Revaluation of fixed assets: reserves created by revaluation of fixed assets should not be capitalised.If assets are subsequently sold and the profits are realized, such profits could be utilised for capitalisation.
d) Bonus issue not to be in lieu of dividend: The declaration of bonus issue, in lieu of dividend, should not be permitted.
e) Fully paid shares: Bonus issue shall not be made, unless the partly paid shares, if any, existing are made fully paid up.
f) No default in respect of deposit/debentures: the company should not have defaulted in payment of any interest or principal in respect its fixed deposits and interest on debentures or redemption of debentures.
g) Statutory dues of the employees: the company should not be defaulted in payment of its statutory dues to the employees such as contribution to PF, gratuity, bonus, minimum wages, workmen’s compensation, retrenchment, payment to contract labour etc.
h) Implementation of proposal: the bonus issue shall be implemented within a period of 15 days after the date of approval of the BoD, it it does not require the shareholders’ approval for capitalisation of profits or reserves for making bonus issue as per the AoA of the company.
However, if the company is required to get the shareholders’ approval as per AoA of the company for capitalisation of profits or reserves, the bonus issue shall be implemented within 2 months from the date of the meeting of the BoD.
i) Provision in the AoA: the AoA of the company should provide the provision for the capitalisation profits, i.e. it must authorise the bonus issue, if not, steps should be taken to alter the AoA suitably.
j) Authorised capital: consequent upon bonus issue if the subscribed or paid up capital of the company exceed the authorised capital, then a resolution shall be passed by the company at its GM for increasing its authorised capital to that extent.
k) Certificate: A certificate duly signed by the issuer company and countersigned by the statutory auditor or the company secretary in practice to the effect that the provisions of the guidelines has been complied with shall be forwarded to the SEBI.
Procedure for bonus issue by a listed company:
A listed public company while issuing the bonus shares must ensure that the issue is in conformity with the guidelines for bonus issue laid by SEBI (Disclosure and Investor Protection) Guidelines, 2000.
Thereafter, the following procedural steps should be taken to issue bonus shares:
1. Fix the date of Board Meeting for considering the following matters
To approve the bonus issue
To approve the resolution to be passed in the GM
To approve the requisite resolution, in order to increase the authorised capital and consequential alteration of MoA and the AoA of the company.
To decide the date for fixing a record date.
2. Notify the date of the Board Meeting at which the proposal for bonus issue is proposed to be considered to the Stock Exchange(s) where the company’s’ shares are listed.
3. Hold the Board Meeting and get the proposal approved by the Board.
4. Intimate the decision of the Board Meeting to the SE immediately after the meeting.
5. Get the approval of the financial institutions, banks, debenture trustees etc, if required as per the related agreement.
6. If the company does not require the shareholders’ approval for capitalisation of profits or reserves for making bonus issue as per the AoA and announced the bonus issue after the approval of the Board of Directors, such issue shall be implemented within 15 days from the date of Board meeting and shall not have the option of changing the decision.
However, if it is required to seek the shareholders’ approval for capitalisation of profits or reserves for making the bonus issue, such issue shall be implemented within 2 months from the date of the approval of the Board subject to shareholders’ approval.
7. Convene the GM and get the resolution for issue of bonus shares passed by the members
8. Forward a copy of the proceedings of the GM to the concerned SE.
9. File the necessary returns in e-Form Nos.5, 23 to the RoC within 30 days from the date of the GM.
10. Notify the record date for lodgement of share transfer forms
11. Give 30 days’ notice to the SE(s) before the record date.
12. After the record date id over, prepare a list of members entitled to receive the bonus shares as per the Register of Members as updated.
13. Convene the Board/committee meeting to approve the list of allottees as prepared and allot the shares accordingly.
14. File the Return of Allotment in e Form No.2 to the RoC along with the requisite filing fees within 30 days of allotment.
15. Get the share certificate prepared, printed and issued to the allottees within 3 months from the date of allotment
16. Submit an application to the concerned SE for listing the bonus shares allotted
17. Forward a certificate to the SEBI specifying therein that all the guidelines of SEBI (Disclosure and Investor Protection) Guidelines, 2000 regarding issue of bonus shares has been complied with by the company.
In case of unlisted company
In order to issue the bonus shares an unlisted company must follow the following procedural steps
1. Convene the Board meeting and pass the following resolutions
To approve the proposal for the issue
To approve the number, price and the proportion of the shares to be issued as bonus shares
To approve the resolution to be passed in the GM
To approve the resolution for increase of the authorised capital wherever necessary and to alter the MoA and the AoA
To decide on fixing the record date.
2. Hold the GM and pass the resolutions as approved by the Board of Directors.
3. File the necessary return in e-Form No. 23 along with a copy of the GM to the Registrar within 30 days from the date of the said meeting.
4. After the record date is over, prepare a list of eligible members entitled to the bonus shares on the basis of Register of members as updated.
5. Convene a Borad meeting/committee of Directors for allotment of shares and allot the shares accordingly.
6. File the return on allotment in e-Form No. 2 to the Registrar within 30 days of the allotment.
7. Prepare the certificate of allotment and dispatch the same to the allottees or prepare and dispatch the share certificates relating to the bonus shares issued to the allottees within 3 months from the date of the allotment.
Where any instrument of transfer of shares has been delivered to a company and the transfer of such shares has not been registered by the company, it shall keep in abeyance issue of fully paid up bonus shares in relation to such shares in pursuance of section. 205(3).
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